Please be mindful, however, that there is a possibility of a false breakout in this case. Traders could also wait for the candle to close, but this comes with the risk of missing a big move in the market. Our suggestion would be to find whichever method works best for you. The other type of Inside Bar trading signal is the countertrend Inside Bar.

Discover the inside bar candlestick pattern, a trader’s key for short-term gains. This compact bar often signals a pause in trending markets, where the next move might be a price breakout, bullish or bearish. I also recommend sticking to inside bars that are in-line with the daily chart trend as continuation signals until you have fully mastered trading them that way.

  1. Moreover, the pattern could be either a trend reversal or continuation chart pattern, depending on the context of the markets.
  2. An inside bar that forms on the higher time frame has more “weight” simply because the pattern took more time to form.
  3. Instead, we have a strong bearish candlestick present itself first which indicates selling coming into the market.

So, you go long when the price breaks above the highs of the Inside Bar. Now, don’t worry about how to set your stop loss or trade management because we’ll cover that later. Now, you’ll learn how to use the Inside Bar strategy to catch the trend. Previously, you’ve learned how Inside Bar allows you to catch reversals in the market.

It does not matter if the Inside Bar is bullish or bearish, all that matters is where the Inside Bar prints relative to existing price action. I prefer smaller and “tighter” inside bars that don’t have really large mother bars…this shows more ‘compression’ and thus a stronger potential breakout from that compression. If you are a beginner or struggling trader, I suggest you avoid inside bars with big mother bars for now, see the previous example chart above for an example of an inside bar with a big mother bar. Like other prominent candlestick formations, inside bars are best located and traded at key locations and price points where other supporting factors can help validate a high probability trading opportunity. Like any other candlestick pattern, the Inside Bar doesn’t give an exact entry and exit points.

They also informed the public that there was no danger to the community. Monday evening’s arrest was not the only time Young had been at a nightlife establishment late in downtown Nashville. On Friday Jan. 19, the performer posted a video to TikTok showing him spotted at the Bootleggers Inn bar at 207 Broadway. Chris Young — a multiple-time, chart-topping, two-decade veteran of country music — was arrested Monday at the Dawg House bar in Midtown.

Inside Bars – How and When to Trade Them

The inside bar is a popular reversal/continuation candle formation that only requires two candles to present itself. This pattern is a direct play on short-term market sentiment looking to enter before the ‘big moves’ that may take place in the market. The inside bar shows a reluctance of prices to progress above/below the preceding candle high and low indicating market indecision. The chart above illustrates price accelerating into a key resistance area that is not as clearly defined by a narrow side to side support and resistance level but rather a thicker wedge pattern. Trading a supposed inside bar at a swing high here could potentially be dangerous as it can be hard to pinpoint an exact price level representing key resistance here.

More Indicators and Chart Patterns Explained

Nial Fuller is a professional trader, author & coach who is considered ‘The Authority’ on Price Action Trading. He has taught over 25,000 students via his Price Action Trading Course since 2008. In the Candlestick Pattern, the second candle is smaller than the previous candle.

Entry and exit strategies

Of course the opposite holds true for trading a bearish inside bar after a break of consolidation. A period of consolidation within a broader trend is the market’s way of regrouping. In an uptrend, the consolidation is triggered when longs decide to begin taking profits (selling). This causes the market to pullback, where new buyers step in and buy, which keeps prices elevated. This pattern continues for days, weeks or even months until new buyers are able to once again outweigh the sellers and drive the market higher. An inside bar that forms on the higher time frame has more “weight” simply because the pattern took more time to form.

They often form following a strong move in a market, as it ‘pauses’ to consolidate before making its next move. You can sometimes trade inside bars as reversal signals from key chart levels. Please note that this should ONLY be tried after you have successfully mastered trading inside bars in-line with the daily chart trend as continuation / breakout plays, as we discussed above.

To get more chart patterns that you can test, go here to get the PDF cheat sheet. Before trading a trending Inside Bar, be sure that there is a strong trend in place. That may sound obvious, but many traders are so eager to enter a trade, that they don’t spend a few extra seconds examining the strength of the trend. It also helps when the mother bar has the highest high or lowest low at the support/resistance level. However, if you have two bars with the same high and low, it’s generally not considered an inside bar by most traders. There are several ways to trade inside bars that stem directly from the trader’s individual risk appetite and possibly the overall strength of the setup itself.

How to use the Inside Bar Candlestick Pattern?

Price action is also in a range and there is no obvious trend or support/resistance level. You might have been lucky if your took a long trade, but over time, you’ll lose more of these trades than you win. Some traders like to use multiple moving averages to define a trend. They usually use 2-3 moving averages and when they are in order from shortest to longest period, that call that a valid trend.

As mentioned above, the inside bar is a two-candlestick pattern that may appear in any market scenario. Identifying the inside bar is not rocket science, and once you have a basic understanding of what it looks like, you will be able to locate it instantly on price charts. You just need to remember a few rules to identify the pattern correctly. The indicator used in this strategy is the 21-day exponential moving average (EMA).

How to trade with Renko Charts Efficiently?

An EMA that moves horizontally means that the price is in a period of consolidation. Since the entry and stop loss are based on the high and low of the second candle, the stop loss is very minimal. The most significant factor of this inside bar trading strategy is the small stop loss. In this article we will discuss the identification of the inside bar pattern. When looking for these types of trades, you first want to identify a strong trend.

We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. The most logical time to use an inside bar is when a strong trend is in progress or the market has clearly been moving in one direction and then decides to pause for a short time. The “classic” and most commonly used stop loss placement will be just above or below the mother bar high or low, depending on if you are trading long or short of course. However, it isn’t a setup that occurs often, at least not in a favorable context. This is why I don’t advocate using the inside bar as your only setup to trade the market.